Many small business owners would rather not think about the legalities of their business, but it is necessary. From protecting your creations against copycats to negotiating the best deals with vendors, getting the legalese right is crucial for your success. Don’t wait until you’re in a sticky situation to handle legal issues associated with your small business.
Here’s a list of legal issues every business owner should consider:
Minimize personal liability and structure your business correctly. The most common types of business entities include: sole proprietorship, partnership, limited partnership, limited liability company (LLC), corporation (for-profit), nonprofit corporation (not-for-profit), and a cooperative. For example, to shield personal assets from company creditors and litigation you may choose to incorporate or form an LLC. If business doesn’t go quite as planned, the corporate veil can insulate you and your personal assets. A business lawyer can help you choose which business entity is appropriate for your needs.
Formalize agreements with co-founders, principals, vendors, suppliers, investors, etc. By memorializing business processes and agreeing on what happens if a co-founder or principal has to leave the business for any reason, you can save yourself a lot of time, money, headaches and drama in the long run.
Intellectual Property: Trademarks, Copyrights and Patents
Your intellectual property (IP) is at the very core of your business. A trademark protects your brand — including your logo, name, slogan and product or service marks. Meanwhile, it is important to perform due diligence and ensure you aren’t infringing on anyone else’s intellectual property, and then register a federal trademark with the USPTO.
Copyrights, on the other hand, protect original works of art, writing or software code, to name a few. You may also need to file for copyright protection or license copyrights at some point. Lastly, patents protect inventions, including business methods and is granted by the U.S. Patent and Trademark Office (USPTO) to allow the patent owner to exclude others for a limited period of time from making, using, or selling an invention (or importing it into the U.S.) The USPTO provides free information on policies, procedures, guides, tools and manuals associated with the patent process
Whether it’s a storefront or other commercial space, as your business grows you will need to negotiate a sale or office space lease. For example, “In most cases, the first copy of a commercial real estate lease you receive will be completely skewed in favor of the landlord. They do this in the hopes that, like many of their other tenants, you will just sign the lease without really understanding it. However, it is important to know that commercial leases are not standardized, and many of the clauses in the lease can be negotiated so that they are fair to both the landlord and the tenant.” (Source: Fit Small Business)
Certain types of products (e.g., medical, alcohol, food, insurance, etc.) and transactions (e.g., securities, international, banking, etc.) are heavily regulated by state and federal laws. It’s important to know whether or not your business falls into one of these categories and strategize with legal counsel on how to handle compliance, before you run into any potential difficulties
As your business grows you will need to hire employees or independent contractors and you must comply with federal and state employment laws. At a bare minimum, you will need to develop a contract between you and your employee or independent contractor and an employee handbook of company policies. You will also need to ascertain whether or not a contractor is an employee, employee exemptions and safeguards regarding confidential information.
This article has been edited and condensed.
Basha Rubin is the CEO of Priori Legal, an online marketplace connecting businesses with a network of vetted lawyers at transparent, below-market and fixed rates. She speaks and writes extensively on how technology and innovation is changing — and will change — the market for legal services. Her writing has been featured in Forbes, Entrepreneur, Inc, Women 2.0 and Under30CEO. She holds a J.D. from Yale Law School and a B.A. from Yale College, and is a member of the New York Bar. She also sits on the boards of A Blade of Grass and the Rubin Museum of Art. A version of this post appeared on the author’s blog. Connect with @basharubin on Twitter.
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